We Live Here - July 2019

03 Jul 2019

Enough is enough. Every day we read of more apartment catastrophes created by builders with the tacit acquiescence of governments:

Cladding made of flammable material on thousands of apartment blocks

Cracking buildings sparking fears of collapse

Contracts for management mates locked in for decades

Apartment owners continue to be ripped off by an industry destitute of morality in Victoria and, indeed, all over Australia. That’s a lot of people caught up in these scandals. For example, one in three Victorians live in a strata title residence, mostly apartments. That’s a lot of voters.

Decades of unscrupulous behaviour in the building industry, alloyed with a lack of effective government regulation are starting to take an enormous human toll – so far with little or no consequences for the perpetrators.

The affected apartment owners are the pawns here, suddenly transformed into mortgage prisoners, either homeless or unable to sell, consequently plunged into penury. Home values and life savings have been wiped out.

It gets worse of course, if you follow the money. The fall-out from two decades of “self-regulated” builders have insurers, globally, shunning the entire industry.

Owners have been hit hard with insurance premiums escalating to excruciating levels. And builders, architects, fire engineers, surveyors, all and sundry connected with the building industry have also been impacted.

Professional indemnity (PI) insurance premiums have skyrocketed up to 500 per cent and some major industry players will not be able to reinsure at all.

Huge Victorian companies employing hundreds of professionals might hit the wall in the next few weeks because insurers are set to decline PI cover all the way back to Lloyds.

Professionals involved in the recent string of headline-grabbing fires and other disasters are obviously being targeted. Some industry players are being stunned with up to seven-figure excess sums imposed, which virtually equates to no cover. And no PI cover means no practice.

You can expect a massive and painful building industry shake-up in the coming months, with enormous knock-on effect for the entire Australian economy.

An open secret - built to demolish

Let’s face it – the building industry surely must implode – if it hasn’t already.

It’s been an open secret, well known at all levels of government and industry, that dangerous and lax building practices were leaving a disintegrating legacy of substandard apartment blocks while bringing short-term profits to builders and windfall gains to the state’s revenue coffers.

The widespread knowledge of the industry malaise has been documented and publicly avowed for some years. In 2015, Emeritus Professor Michael Buxton from RMIT university told a We Live Here community forum that an appalling proportion of buildings in Melbourne would have to be demolished within 10 years because they had been built so poorly.

Against the landscape of crumbling buildings there are other dramas playing out. For example, tens of thousands of Victorians also need relief from blatantly immoral building manager contracts. Many unconscionable management contracts have opaque costs, embedded commissions and irrevocable terms of up to 25 years. This inequity needs to be eliminated. While this has been recognised in the exposure draft of the Owners Corporation (OC) and Other Acts Amendment Bill, no date has yet been set for when the Bill will be introduced into Parliament.

For apartment dwellers, the building industry has been and remains a national disgrace. We need a Royal Commission to clean it up. A Royal Commission would also give governments the political capital needed to make decisions that look after owners and residents.

Is the party over for short-stays?

Right now, short-stay party damage and violence is continuing unabated. But will it be over soon for long-suffering Victorian apartment residents? We hope so but we won’t hold our breath.

We Live Here has also reported on the case here in Melbourne concerning the massive repair bill escaped by a short-term business courtesy of Victorian legislation (the so-called Airbnb Bill), which sheets most of the cost of party damages back to hapless owners.

This case involved a large party held in a luxury penthouse containing a sauna, which set off the fire sprinklers. The resultant flooding extensively damaged the apartment directly below and, months later, the innocent owner-occupier is still counting the cost.

But is there a chance that the short-stay onslaught could be stemmed? Maybe.

VCAT, long the nemesis of OCs, has finally delivered a verdict that supports rather than opposes the right of OCs to control access to a building.

In this case, while confirming that OCs in Melbourne do not have the authority to implement a total ban on short-stay leasing, VCAT did validate other methods of control that could be used, including:

The legal right for OCs to prevent entry into the building without three days’ notice being given; and

A requirement for a short-stay tenant to take part in a building induction before entry is permitted. The decision also validated the right of the OC to charge a fee for the induction.

While this is a significant step forward for beleaguered OCs trying to curb the excesses of short-term leasing in their residential buildings, it does require a special resolution to be passed for these new rules to be implemented. This can be quite difficult to achieve, particularly for large buildings.